Home Offer

Iamchris

Shakey Snake
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The wife and I have been viewing houses for the past few months. We want to get out of our current spot within several years, but we arent in a rush. Recently our realtor showed us a house that was listed well below market value, bank owned. I am just wanting to get some opinions on the situation...

We really like the house but it is going to need some work. The story is that it was being built for someone, when it was almost finished the buyer backed out and stuck the builder. The builder then moved into the house and defaulted on it within 4 years. The bank took the property. The property listed at 450K, came down to 350k and a buyer moved on it. They lost their financing after the house failed the septic inspection. In this state, a failed title 5 requires either a 203K rehab loan or a cash buyer. The house then sat vacant for a year, in which time it has a pipe burst on the outside wall, which damaged the laminate floor in the living room. They also cut into the walls in about 20 places, looking for the leak(possibly repaired). Over this time the price dropped down to 200K.

We have an offer in well below the ask and are looking at a counter offer now.

Highlights here are this:
  1. Failed septic, I sent the report to a septic engineer and he said it could be up to a 19k repair.
  2. Plumbing unknown, may require more work. Some minor water damage from previous break.
  3. A fair amount of cosmetic work needed. Holes need to be patched, laminate in living room replaced, paint, some unfinished stonework, trim, ect
  4. Concrete slab foundation, which is strange in this area.
So, I am a cash buyer. To use round numbers lets say I give these guys 150k and proceed to put 100k into it. The plan is, 150K out of pocket, with a refinance against the home to cover repairs. We are of course going to have inspectors run through this thing before we finalize. That is 250K, I am still gaining equity, but there is a risk of cost overrun depending on what is actually wrong with this house.
The bank honestly doesnt know much and cant seem to move the house based on the hassle of financing, plus the location is a bit obscure for most people.

Am I missing anything here? I am thinking of moving forward on the counter offer and just wanting another voice, or 10.
 

M91196

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I’m gonna ramble as a fellow Masshole that’s looked at building on my own plot of land for a while....but is scared off by the high cost.

I would be very concerned that someone who built a home on a slab in MA that already failed a septic design could have built a quality home.

I’d love to see the prints especially for all the electrical and water. And the septic design should be at the board of health.
Maybe town hall still has them accessible if it’s only a few years old. The people that work there often have great inside info if it’s a small town like my location.

I also believe every real good deal never gets to see the light of day if a bank is involved. They have so many contacts with $$$ to spend that it’s been viewed by dozens of people that want to make money with it and they passed.

Not trying to be a downer, just sharing my thoughts. Good luck from the 413.
 

Zemedici

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Plumbing is VERY expensive, especially septic work. It could EASILY run 15,000+ if the system needs replacement (saturated, incorrect install, issues with leach field draining) so keep that in mind.

Also, this type of house is a full time job to renovate. Are you going to live in it while it is being worked on? Are you going to to do the work yourself, or hire contractors? My uncle bought a 'fixer upper' thinking it would be a fun project for him and his wife. Bought a $400k house on the lake for $180k.

He now realizes why it was $180k. He's put over $100k into it, and doing a lot of the work himself. Luckily his job allows him a lax schedule, or else he couldn't work on the house while holding his job.

Some things to think about.

You're wanting to refinance the home to pay for some of the repairs, why not buy a $350k house, put that same cash down, and have a similar mortgage, but the house is completed?
 

RDJ

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I would do the following:

1. get a plumber, electric, an d foundation inspection

2. get an independent appraiser out to look at it and give you an estimate of what the house will sell for once everything is fixed.

3. look at the failure report to see why if failed. if it's outside the slab I wouldn't worry too much, if it is inside the slab walk away

4. if it will give you at least 100K back out should you decide to sell I would do it. but it won't be easy and make sure the wife and kids (if any) can live with being resident in a long term project unless you plan to have all the work done before you move in
 

Iamchris

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So to answer a few questions, the septic and plumbing would be handled by a professional. Our plan is to remain in our current home until the new home is complete, then sell our current home. When the house is livable, we would move in, knowing that the cosmetic work still needs to be done.
The septic system had a fitting installed wrong on the D Box which caused the leach field to go bad. The leach field needs to be engineered and replaced. Based on my understanding, it is all located outside of the slab.
My biggest fear at this point is that some of the plumbing failure could be under the slab. That is only a paranoia though, there is no reason to believe that.

I am shooting to extend the inspection period and have a plumber and septic specialist take a closer look to give me a more accurate idea of what is happening. The biggest risk at the moment is going to be paying inspectors. If the house is too far damaged, I plan to walk away.
 

Zemedici

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So to answer a few questions, the septic and plumbing would be handled by a professional. Our plan is to remain in our current home until the new home is complete, then sell our current home.
The septic system had a fitting installed wrong on the D Box which caused the leach field to go bad. The leach field needs to be engineered and replaced. Based on my understanding, it is all located outside of the slab.
My biggest fear at this point is that some of the plumbing failure could be under the slab. That is only a paranoia though, there is no reason to believe that.

I am shooting to extend the inspection period and have a plumber and septic specialist take a closer look to give me a more accurate idea of what is happening. The biggest risk at the moment is going to be paying inspectors. If the house is too far damaged, I plan to walk away.

The DoEH needs to come out and do a soil test to let you know where / what can be done about the leach fields, then the plumbers can come in and give you estimates. It should not be a problem with the slab, but as you said, you never know.

I would get inspections done, and go from there. Good plan.
 

Iamchris

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I’m gonna ramble as a fellow Masshole that’s looked at building on my own plot of land for a while....but is scared off by the high cost.

I would be very concerned that someone who built a home on a slab in MA that already failed a septic design could have built a quality home.

I’d love to see the prints especially for all the electrical and water. And the septic design should be at the board of health.
Maybe town hall still has them accessible if it’s only a few years old. The people that work there often have great inside info if it’s a small town like my location.

I also believe every real good deal never gets to see the light of day if a bank is involved. They have so many contacts with $$$ to spend that it’s been viewed by dozens of people that want to make money with it and they passed.

Not trying to be a downer, just sharing my thoughts. Good luck from the 413.
Thanks. We actually pulled the septic report and had the engineer look at it. He didnt seem too concerned.
Valid points otherwise though, we have considered why this thing is sitting and hasnt been moved on by a contractor. At this point we are optimistic in thinking that it is pure luck... but we could be wrong.
 

RDJ

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only thing I would change is to not wait to sell your house until the house is complete. I would wait till the most serious work is done and then put your house on the market with an eye to renting it back until after the new house is done. you don't want to wind up having to wait for your house to sell IMHO.

So to answer a few questions, the septic and plumbing would be handled by a professional. Our plan is to remain in our current home until the new home is complete, then sell our current home. When the house is livable, we would move in, knowing that the cosmetic work still needs to be done.
The septic system had a fitting installed wrong on the D Box which caused the leach field to go bad. The leach field needs to be engineered and replaced. Based on my understanding, it is all located outside of the slab.
My biggest fear at this point is that some of the plumbing failure could be under the slab. That is only a paranoia though, there is no reason to believe that.

I am shooting to extend the inspection period and have a plumber and septic specialist take a closer look to give me a more accurate idea of what is happening. The biggest risk at the moment is going to be paying inspectors. If the house is too far damaged, I plan to walk away.
 

Machdup1

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If it is a flipable property and the plethora of house flippers aren’t jumping on it, you should do a lot more research before moving forward.
 

Iamchris

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If it is a flipable property and the plethora of house flippers aren’t jumping on it, you should do a lot more research before moving forward.
Valid point. The thought is that it ties up a decent amount of cash equity for most people... or you need to have a 203K loan which is not only expensive but time consuming to establish. Couple that with the location and a slab foundation where it is rare to find them... I'm not sure, but certainly aware.
 

Dip Dungles

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Sounds like you have a pretty good plan on what to do. Paying inspectors isn't a risk IMO because after it's all said and done pony upping a few hundred $ to let you know you made a sound decision is worth every penny.

My wife and I were in a similar situation a few months ago and ended up going with what Zemedici suggested because we didn't want to live in a work zone.

Good luck and let us know how you do.
 

Voltwings

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My wife and I are currently in the process of building - not that I think it's related to your particular scenario, but this is just how my brain acts in this situation.

1. As others have mentioned, this was a new construction that failed septic? Is this in a neighborhood or a one-off custom build? What's this builders reputation?

2. What made this house cost $450k to begin with? Location? Prestige? Amenities? Fixtures? Sounds like a lot of the interior was damaged, so if you're replacing it all yourself you're really just going to spend all of that money anyways right? It's not like you're actually getting a deal on the place.

3. Permits, zoning, and code. It sounds like there have already been inspections done, but I've heard more than one horror story of a hlip gone wrong because they just got bogged in zoning permits and code permits and this that and the other. These builders have teams of people to handle these things usually...

Now, I openly admit I am a pretty pessimistic person and tend to not take risks of this nature. Your results absolutely may be positive and it will be a great thing for your family, I just tend to plan on worst case scenario to be safe.
 

M91196

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Valid point. The thought is that it ties up a decent amount of cash equity for most people... or you need to have a 203K loan which is not only expensive but time consuming to establish. Couple that with the location and a slab foundation where it is rare to find them... I'm not sure, but certainly aware.

This.
Also, you can learn a lot by pulling the existing stuff and talking to people in town hall, the septic design should include a secondary as well.

Check out the well too, that’s another one they skimp on big time.

And try getting 2-3 estimates or inspectors, it will give you an idea how tough things are even when your ready to spend.....
 

Coiled03

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Sounds like it's just a risk tolerance thing at this point.

Your plan sounds more than adequate, IMHO.
 

Dr. Gonzo

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OP and his Wife
605f43ac9075a3a6d41af3587bc610f289ff16ba.jpg
 

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